The housing market across England and Wales is currently experiencing a subdued and downbeat period, primarily driven by heightened fears of higher mortgage rates and rising inflation, both of which are largely attributed to the ongoing conflict in the Middle East. Estate agents report a “noticeable softening” in demand from potential homebuyers, according to a recent monthly survey conducted by the Royal Institution of Chartered Surveyors (RICS).

RICS members have noted a growing caution among both buyers and sellers. Many clients express concerns about the potential for inflation and interest rates to climb in the coming months, anticipating a cascade of effects including slower sales, fewer available homes on the market, and an increase in price-sensitive buyers. These anxieties are not unfounded, as the Bank of England issued a warning last month that interest rates might need to rise in the near future, citing “higher inflation is unavoidable” due to the Middle East conflict’s impact on global oil and gas prices. Concurrently, mortgage rates are expected to be influenced by the sharp increase in government borrowing costs, given that swap rates, which lenders utilize to price fixed-rate mortgages, typically mirror government bond yields.

Tarrant Parsons, head of market research and analysis at the RICS, emphasized that market activity and sentiment are likely to remain subdued until a clearer trajectory for inflation and borrowing costs emerges. This trend is particularly acute in southern England and London, regions where affordability pressures are already most significant.

The RICS report detailed specific indicators of this market weakness. A net balance of 34% of its members reported a decline in new buyer inquiries in April compared to the previous month. While this marks a slight improvement from the 40% net balance reported in March, it still signifies